The Trials & Tribulations of Money Management as a Couple

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How do you, as young professionals, manage your household finances? Who is the saver and who is the spender? Do you fight over money? A 2008 survey by Parade Magazine found that money was the leading cause of marital fights. And rightly so. There was no class in high school or college titled, “How to manage money in a relationship.” So when it comes to figuring out finances, it's literally trial by fire. And the fire can cause burns.
 
But money doesn’t have to lead to arguments in your relationship. Taking the time to discuss expectations for how finances should be handled can yield surprising results. Here are the strategies my wife and I use to keep the most common money issues at bay, as well as what I have seen work with my clients.
 
Paying the bills
This is one of the top triggers for arguments I see among couples. The scenario: One person usually feels that all the bills are being paid from their checking account or coming out of their paycheck, while the other is spending freely on whatever they want. The solution: If both people are working, open a joint checking account and call it the “bill pay” account.  All of your bills should be set up to come out of this account. Now, add up your combined yearly income and figure what percentage each person is earning of that total. The bills should be paid based on the percent of the money each person earns. 
 
For Example:  Mary and John are married, Mary’s net take-home pay is $60,000 and John’s is $40,000 a year. Their total is $100,000 with Mary’s share at 60 percent and John’s at 40 percent.  If the bills for the year total $40,000 then Mary should contribute $24,000 to the bill pay account and John should contribute $16,000. Now each person can have their own funds to save, spend or contribute to other goals.
 
Making big purchases...without discussing 
The scenario: One person spends a large sum of money, but doesn't include his or her significant other in the decision. The solution: The simple answer is to set a limit where one doesn’t have to check with the other first. This number should be whatever feels comfortable based on income and the nature of the relationship, but most couples agree to $200 to $300 per transaction. Notice I said transaction and not per item! In other words, purchasing three pairs of shoes at $200 a pair is not sticking to the limit. 
 
Money doesn’t have to drive a wedge between you and your loved one. Create a spreadsheet with your household’s spending and try these tactics for three months. It’s not an exact science--see what works, what doesn't and make adjustments where needed. But most importantly, stick to the agreements you establish as a couple. The results, I think you will find, will alleviate the finance-based misunderstandings and disagreements that plague so many relationships.
 
(Photo credit: Magic Storm; C.C. 3.0)
 

Nick Wychocki works for Global Wealth Consultants, a registered investment advisory firm, as their Senior Wealth Strategist.  He has worked there for six years in beautiful Naples, Fl., after having cut his teeth in the currency options pits of the Chicago Mercantile Exchange. He is a CFP certificant and a graduate of the University of Florida’s MBA program.
 
Read more from Nick Wychocki on why a life insurance policy can be an important component of a well-rounded financial plan.